Question

Which of the following statements is false?

1)	A residual income of zero is acceptable.

2)	A positive residual income is acceptable.

3)	A negative residual income is unacceptable.

4)	The last budget prepared is the cash budget.

5)	The first budget prepared is the sales budget.

The manager of an investment center is:

1)	Responsible for controlling costs only.

2)	Responsible for control costs and generating revenues only.

3)	Responsible for controlling costs, generating revenues and investing in operating assets.

4)	All of the above.

Which of the following is a true statement?

1)	The direct materials quantity variance is computed based on actual materials used.

2)	The direct materials price variance is computed based on actual materials purchased.

3)	The direct labor rate variance is based on actual direct labor hours incurred.

4)	All of the above are true statements.

Answer 1

Solution 1:

The false statement is "The last budget prepared is the cash budget." because last budget perpared is "Budgeted balance sheet"

Hence option 4 is correct.

Solution 2:

The manager of an investment center is "Responsible for controlling costs, generating revenues and investing in operating assets"

Hence option 3 is correct.

Solution 3:

The true statements are:

	1) The direct materials quantity variance is computed based on actual materials used.
	2) The direct materials price variance is computed based on actual materials purchased.
	3) The direct labor rate variance is based on actual direct labor hours incurred.

Hence option 4 "All of the above are true statements" is correct.